Subhiksha not paying some bills

Feeling the heat: Subhiksha MD R. Subramanian The discount retailer is facing a supply crunch in the NCR, with many wholesalers of fruit and vegetables stopping supplies to the firm over non-payment o

Updated: Fri, Sep 05 2008. 01 02 AM IST

New Delhi: Subhiksha in Sanskrit means “the giver of all good things in life”. Just don’t tell that to some vendors in the Capital’s largest wholesale market for fruit and vegetables, who allege that the no-frills discount retailer, Subhiksha Trading Services Ltd, hasn’t paid them their dues for the past several months.

As a result, many wholesale suppliers in Azadpur mandi, or market, say they have stopped supplying to various Subhiksha outlets in the National Capital Region (NCR) as Delhi and its environs are collectively called, after their payments were held up for anything between two and six months. As a rule, bulk buyers pay up suppliers within a month.

A senior office bearer of Vegetable Traders Association of Azadpur put the amount due to suppliers at around Rs2 crore. He didn’t wish to be identified. At least half a dozen other fruit and vegetable sellers in the mandi, however, said it could be as high as Rs3 crore.

A trader, who did not wish to be named, said: “I will stop supplying to Subhiksha the day I recover my dues.” He claimed his outstanding against the firm was more than Rs30 lakh. “If I stop supplying to them, they may withhold my previous dues.”

A Subhiksha official, however, downplayed the issue.

“If you are doing business and someone’s payment is delayed, it could be for several reasons. It could be because of supply issues, quality issues, or billing issues,” said Ashu Phakey, president (Delhi region) at Subhiksha. He said he was unaware of the payment-related problem at Azadpur even as wholesalers maintained they called on him at his office as well as spoke to him on phone. “Since they are not organized kind of vendors, they, at times, have problem in being able to reconcile their accounts because they don’t operate with all the invoices…so some guys may have problems.”

Feeling the heat: Subhiksha MD R. Subramanian The discount retailer is facing a supply crunch in the NCR, with many wholesalers of fruit and vegetables stopping supplies to the firm over non-payment of dues. Harikrishna Katragadda / Mint

R. Subramanian, managing director of Subhiksha, said he was also unaware of such a problem at Azadpur. “We work in a completely decentralized system...we do not really handle payments to vendors centrally at all,” he said. However, he admitted that there are some “reconciliation issues” and said Subhiksha’s “team in Delhi was going through a large-scale reconciliation of accounts in Azadpur market”.

But in NCR, many vendors, who have not been paid their dues, say they have stopped their supplies to the retailer.

Sujeet Kumar of Sujeet Ajeet and Co. said he stopped supplying to the retailer two months ago after unpaid dues amounted to around Rs25 lakh.

The result of the stopped supplies is that many Subhiksha outlets across NCR have either downed shutters, or are doing little business. A Subhiksha fruit and vegetable outlet in sector 62 of Noida has been shut for the past week. A security guard manning the outlet claimed it was because of a “supply problem”.

At Moti Nagar, only a crate of potatoes and a large watermelon adorned the otherwise completely empty racks in the “Fresh” section of the company’s supermarket. A guard at the gate said supplies of goods and fresh fruits and vegetables in particular had not arrived for the past three weeks. “I hear the company hasn’t paid the vendors for supplies; that is why goods are not coming,” he claimed.

The scene was no different at grocery stores in Noida’s sector 61 and 62. “There is hardly anything to sell,” said a store employee. “I heard there is a crisis at the top,” claimed another. A store manager blamed the poor supply to a strike by staff at a warehouse because “they hadn’t been paid salaries”. None of these employees wanted to be identified because they are not authorized to speak with the media.

Meanwhile, some wholesalers at Azadpur allege that they went to the company’s regional office in New Delhi’s Neb Sarai area, but to no avail. Some vendors also accuse Subhiksha of offering to settle dues if the suppliers were ready to take a cut in the total amount. “They are asking us to forego 50% (of our dues) and take 50% of the payment,” said Sanjay Aggarwal, chairman of Dev Bhumi Cold Chain Pvt. Ltd. “They say, ‘otherwise you can go to court’.”

Dev Bhumi had been supplying apples and kiwis to Subhiksha for the past year-and-a-half. But since mid-February, the supplier said he not only stopped supplying to the retailer, but also sent a legal notice over non-payment of dues. Now, Aggarwal is planning to take the retailer to court to recover dues of about Rs5 lakh.

In an emailed reply, Mohit Khattar, Subhiksha’s president for marketing, said the amount owed to Sujeet Ajeet and Co. is only about Rs3 lakh against a claim of about Rs9 lakh. Kumar claims his other unit, Rajpal Ajeet Singh and Co., is owed Rs16 lakh by Subhiksha. Similarly, in the case of Dev Bhumi, Khattar said the amount owed was Rs1.4 lakh against a claim of Rs5 lakh. “We have requested the party to provide details in this regard to enable a reconciliation and are awaiting particulars,” said Khattar.

Meanwhile, Dev Bhumi received a letter from Subhiksha on 4 September (two days after Mint sought clarification from the retail firm on payments to the vendor) saying the firm didn’t reply to a letter dated 15 July in which Subhiksha had raised “objections” on “quality issues”. Dev Bhumi said it never received the 15 July letter. “It’s ridiculous that they are raising objections on quality for supplies that were made in February 2008,” said Anil Dwivedi, director, Dev Bhumi.

Subhiksha, according to some of these wholesalers, usually paid on time, but things started souring in March. The company, which runs India’s largest chain of discount supermarkets, has been one of the most aggressive organized retail players. It has flooded the country with hundreds of outlets in the past two years. It has opened at least 200 grocery stores, pharmacies and mobile phone outlets in NCR alone in the past two years.

The discount retailer is one of the dozens of domestic companies that are trying to change the way Indians have traditionally been shopping across numerous garage-size mom-and-pop shops.

However, in the absence of their own farm-to-shop supply chain, most of these modern retailers have had to rely heavily on traditional mandis such as Azadpur for supplies.

Subhiksha ended 2007-08 with a revenue of Rs2,300 crore and, in an interview to PTI in January, Subramanian had said he was eyeing an annual revenue of around Rs4,500 crore this fiscal.